Asset Into a Success Story
Facility Improvements The first year of the new manage-
ment agreement required a focus on asset stabilization and addressing of inefficien- cies. With Denison handling the day-to- day operations, Next Parking worked with ownership to address the large-scale deferredmaintenance issues. Utilizing Denison’s strong existing
vendor relationships, Next managed the long list of necessary improvements. The elevators were repaired. The cleaning team swept the garage; it took three sweepings to get the basement floor clean. Apologies were made to customers and vendors. The next phase ofwork to be done on
the garage is crucial structural repairs, which are projected to cost more than $200,000. Next Parking has worked with the vendor to provide financing; all pay- ments will come out of the operating income for the facility. Overseeing and negotiating these aspects are parts of its service to clients. The Maryland Street Garage in Indi-
anapolis is back on track. Continued on Page 34 The Maryland Street Garage in Indianapolis.
Q and A Question: Howmuch of a difference can an operatormake?
Answer: Take the elevators in theMaryland Street Garage, for example. The old operator had not been paying the contract to upkeep the elevators for so long that when they stoppedworking, the vendor refused to come and repair them. The owner’s seven-story garage had no functioning elevator.When the newoperatorwas installed, its excellent relationshipwith the elevator company enabled a repair technician to come and fix it the first day of operation – at a cost of only $5,000.
Question: Should you choose a lease or amanagement agreement?
Answer: It depends on your needs and the parking operator you select. It’s nice to have the predictable income streama lease provides and not have toworry about the financial aspects of the operation on a day-to-day basis, but consider the
trade-offs.Alease does not equal safety. The financial health of the lessee (whether they can absorb changes in business and continue paying rent) and their ability to stick tomaintenance schedules (operational and structural) are crucial considerations. In a lease, you are giving up control of your asset, so make sure your lease includes appropriate defaults and “cure” periods – and that you have developed a plan for lessee default.
Question: Howdid the owner pay for all these improvements?
Answer: Through all the improvements in the past 18months, the owner has not had to providemoney from reserves or issue a capital call to its
investors.As part ofNext Parking’s services, it creatively structured financing and delayed billing options so that all of the cost for improvements has been absorbed into the operating funds. Evenwith these costs, the owner is still receiving the same amount annually as under the prior lease.
Parking Today
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